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Despite its maturity the print publishing sector is still dynamic and remains an area where M&A can be employed to create value, according to delegates at the recent Media Finance 2007 forum.
Nick Teunon, Group Finance Director of the Press Association and chairman of PA Business, the group’s B2B arm, which owns MediaFinance, addressed the growing trend of publishers breaking news online, but leaving analysis of the news to the print editions.
Tim Bowdler, Johnston Press, talked of his company’s niche in the local community press, which still plays a pivotal part in the local community, especially in relation to advertisers. Bowdler talked of acquisitions locally to extend reach and local status, combined with an interactive digital platform. Bowdler added that Johnston Press has no plans to launch operations outside of the UK, choosing instead to increase in its niche areas in the local UK communities, although he did say he was watching with interest Mecom’s acquisition of Continental newspapers. “Our investors know us for owning and integrating UK regional and local newspapers and this is what we do. We are not looking at any acquisitions outside the UK but that is not to say we will never do one. Who knows, David Montgomerie may turn out to be regarded as something of a trailblazer in that department.” said Bowdler.
Lastly, Bowdler addressed UK recruitment advertising and reaffirmed his belief that, while some structural changes had occurred, mainly migration of job ads online and changes in government recruitment volumes, the business is still largely cyclical. Bowdler said that recruitment advertising in the southeast of England, where Johnston Press first noted a downturn, has now become the first region in its portfolio to witness a rebound.
On the subject of Europe, Marco Sodi, a managing partner at private equity firm Veronis Suhler Stevenson said many opportunities remained outside the UK and Ireland. “Many markets in Europe are still relatively fragmented and so there are opportunities to buy and build up companies through building scale.” VSS, which recently acquired the US’ fifth largest B2B publishing group, Advanstar, for US$1.1bn, highlighted Germany as a market with great potential with many privately owned regional newspapers. However, Sodi said that investors remain wary of markets where regional papers are heavily influenced by politics and unions.
B2B giants to challenge Google
There are likely to be more deals involving B2B publishers buying digital research companies, as they look to further their online transition, according to Mark Beilby, a managing
director at Dresdner Kleinwort. During the Digital Marketing and Research Panel at Media Finance 2007 Beilby said “For companies wanting to deliver primary research it’s easier to acquire online expertise than to try and master it yourself.” Beilby said that while Google was the main outlet for search advertising it only harnesses what exists rather than creating individual solutions. “Therefore an opportunity exists in the B2B sphere for bespoke algorithm based search engines such as Reed Elsevier’s Zibb.com and publishers like UBM,” he added.
Thomas Gerteis, CEO of web marketing company Global Media, also predicted
more digital and non-digital consolidation and spoke of a desire within
the market to challenge Google. “Markets don’t like monopolies
and so naturally there will be a reaction,” he said. Speaking on an
earlier New Media panel, Eric Lawson-Smith, MD at the investment bank LongAcre,
said he thought directory businesses have a lot of catching up to do to
make up lost ground in the online space. Lawson Smith also suggested that
directory companies ought to be ‘looking over their shoulders’
in this age of new media content because the
inefficiency of the industry and the shift of advertising to online could
cause them serious problems. “The likes of Yell and PagesJaunes will
need to be very careful,” he warned.
The panelists’ comments were put sharply into context days later when rumours began circulating that Google was about to make a bid for Yell Group. Yell in previous years has sought to bulk up through geographical expansion, buying directories in Spain and North America but has been notable for failing to deliver any online innovation. Google, whose mastery in monetising online ads is unquestioned, would be buying gain through an acquisition of Yell, which has a huge customer base of SMEs and larger businesses which it could then migrate online.
Print firms look to on-line classifieds
Meanwhile, the success of on-line classifieds and their appeal to advertisers will continue to lure acquisition interest from traditional publishers in 2007/08. Speaking on the finance panel at Media Finance 2007 William Kadouch-Chassaing, executive director, JP Morgan, said: “Higher market share and margins for online classifieds mean that more print companies will try to make acquisitions and therefore benefit from this trend.” Apax Partners’ recent acquisition of Trader Media Group is a good example of a deal based on exploring new geographies said Kadouch-Chassaing, who predicted many deals occurring on geographic rationale during 2007, as well as plenty of restructuring of media assets.
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